Question

Exercise 6-7 Segmented Income Statement [LO6-4]

Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $660,000, 42%, and $13,200, respectively. The North Division’s contribution margin and contribution margin ratio are $119,600 and 46%, respectively. The South Division’s segment margin is $64,000. The company has $105,600 of common fixed expenses that cannot be traced to either division.

Required:

Prepare an income statement for Shannon Company that uses the contribution format and is segmented by divisions. In addition, for the company as a whole and for each segment, show each item on the segmented income statements as a percent of sales. (Round your percentage answers to 1 decimal place (i.e .1234 should be entered as 12.3).)

Answer 1

			Divisions
	Total company		North		South
	Amount	%	Amount	%	Amount	%
Sales	660000	100.0%	260000	100.0%	400000	100.0%
Variable expenses	382800	58.0%	140400	54.0%	242400	60.6%
Contribution margin	277200	42.0%	119600	46.0%	157600	39.4%
Traceable fixed expenses	158400	24.0%	64800	24.9%	93600	23.4%
Territorial segment margin	118800	18.0%	54800	21.1%	64000	16.0%
Common fixed expenses	105600
Net operating income	13200